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Comment by pavlov | Hacker News Reader

Greece voluntarily joined a larger currency zone and reaped the benefits for a decade.

Should state elections in Mississippi drive US Fed policy?

Reaped the benefits? Greece's GDP dropped 30% since 2008 it and was forced into austerity by the Troika to move debts from the left pockets of Deutsche Bank to the right pockets, with the interests paid for by Greek tax payers.

> Reaped the benefits? Greece's GDP dropped 30% since 2008

Most of it was due to the fact that Greece had forged their nation accounting to falsify their actual state and hide sovereign debt, and once they faced bankruptcy they had no alternative than to come clean and straighten their accounting.

Another important fact that is oddly left out by proponents of the "austerity is a conspiracy" rhetoric is the fact that EU's national accounting reform kicked into effect in 2014, and included anti-accounting engineering measures which were highly abused to artificially inflate GDP and mask sovereign debt.

> it and was forced into austerity by the Troika

This conspiracy theory is absurd, as it weirdly imits the fact that member-states that underwent bailout processes had already exhausted their own access to sovereign debt markets resulted from their own financial and economic colapse, and the ECB/EU/IMF trio were quite literally the last people in the whole world willing to lend emergency funds that helped them soften the blow of the problem these countries' governments created to themselves over the years.

Look, I'm no Greek, and you're entitled to your opinion. The problem is this is exactly the same kind of finger pointing and the Greeks (the Spaniards, the Italians, etc) are the spoiled brats rhetorics that are creating toxic politics in Europe and causing the rise of far right populists. I wouldn't imagine a rhetoric where evicted homeowners are blamed for causing 2008 crisis with irresponsible borrowing instead of the Wall St.

> The problem is this is exactly the same kind of finger pointing and the Greeks (the Spaniards, the Italians, etc) are the spoiled brats

You're getting emotional and in the process trying to out words into others people's mouths for no good reason. Greece's problems were a political and institutional problem, and it's not possible to hide this fact and its consequences. You cannot have a string of governments patently and systematically committing state-wide accounting fraud, and even resorting to paying consultants to optimize their fraud, and still try to spin it as emotional pettiness. Eventhough the actual Greek people had to bear the blunt of the problem, that changes nothing with regards to the problem, what caused it, andwho were responsible for it.

He was merely stating facts and your analogy is wrong.

It would have been impossible for Greece's GDP to drop by that amount (in absolute terms) before it joined the EU. Because it quadrupled after joining.

Here, check out this graph, which rather obviously shows the benefit of joining the EU in 1981: https://www.google.com/search?q=greece+gdp&oq=greece+gdp&aqs...

It quadrupled after joining because it borrowed money from Germany and other countries to buy German cars and other goods, not unlike the early stage of Bretton Woods. It had the lowest debt level before joining, like a fat cat to be squeezed by EU bankers, which was also why it was fast-tracked in joining the EU when it clearly didn't meet many clauses of the Copenhagen Criteria.

But when push came to shove in 2008, the debts were exploding not in Germany, but in Greece.

GDP stands for gross domestic product. As its name indicates, GDP measures the production of final goods and services. Borrowing foreign money to buy foreign goods has no effect whatever on a country's level of production and therefore it cannot have any effect on the country's GDP either.

> Borrowing foreign money to buy foreign goods has no effect whatever on a country's level of production

And this is where you're wrong. Borrowing money has a direct and deep impact on ta country's level of production, mainly because that cash is dumped on the economy by spending it on buying goods and services.

Thing is, it's GDP exploded for now underlying economic reasons in the previous decade... and they all consumed the absolutely unearned wealth produced by nothing but cooking the books.

The real "fair" solution would be: to auction off their sovereign territory to the highest bidder, and paying off debt with that cash. If they try to object, confiscate their merchant fleet and block ports with aerial minelaying.

Assuming that you don't care about the Greek people (and obviously you don't) and assuming that the narrative of "we the European people" is false (that obviously it's), what about the public debt?

Because all the actions that took place "to fix" Greece was in order to fix the problem of the public debt. So, I suppose that now, after all the "hard medicine" the problem is solved. Well, it's not and it's not predicted to be in the future.

So, what was all this about?

None of the predictions made at the time by all those hardliners in Germany and company have become a reality. Of course, the guilt is going to be again on the Greeks. Then they will complain when the people turn anti-European and rationalistic.

> Because all the actions that took place "to fix" Greece was in order to fix the problem of the public debt.

That assertion is quite wrong and fly in the face of facts and history.

For example, Greece received a massive debt pardon which whiped out about half the state's debt toward private banks. This alone triggered the bankruptcy of a bunch of private banks, including from other countries also undergoing bailout processes of their own.

Additionally, the bailout process was focused on controlling structural deficit, and not debt. Debt is not the problem, but depending on loans just to keep the state operating is a collosal problem. After Greece's accounting fraud was blown, Greel governments were forced to face the problem of the Greek state enduring double digits deficits. "Austerity" is just a fancy word for "we need to reign in all this overspending", and it boggles the mind how the fact that Greece was routinely spending over 10% of it's fiscal revenue, resorting of loans after loans to cover the difference, is simply omitted or glanced over.

This is exactly why i think the approach taken has been wrong. Austerity was an obvious mistake, it didn't work. What could work was just immediate debt repayment with whatever assets available. Either voluntary like: cutting them off with naval and aerial blockade and making pay for anything including critical imports, only after the debt is repayed, and only in cash, or involuntary say by taking some Mediterranean islands with airborne or sea invasion and selling the land off, deporting the population (obviously compensating the said population at market prices, meaning private entities or persons shouldn't suffer, point is taking sovereign i.e. government land).

I think this isn't going to get fixed until the debt between nations will not be given against some specific collaterial with understood and universally accepted means of taking it regardless of sovereignty. I.e. don't give money to those stronger than you, and be ready to take it back at gunpoint.

Benefits? Which benefits? Eurozone is the lowest-growing area of the world. It destroyed more GDP than the II World War comparing with trends before Euro and with other countries at the same time.

> Should state elections in Mississippi drive US Fed policy?

EU is not a Federal Country, not a State and most of all not a Nation. It's just a common table where each country fights for their interests and the biggest state try to eat all the others not caring about its level of export.

> It destroyed more GDP than the II World War comparing with trends before Euro and with other countries at the same time.

What??

https://2.bp.blogspot.com/-rBugkBzP4j4/U_cZG1HB04I/AAAAAAAAB...

This is a comparison of Italian GDP between 1929 crisis, IIWW and 2007 crisis.

Definitely they didn't go down like IIWW but they didn't bounce either, so in the long term far more growth has been destroyed.

NY private banks lend money to Mississippi banks. At some later point, the global market crashes and NY ""suddenly discovers"" that Mississippi officials lied about the state's finances. NY now wants their money back in the middle of a world-wide crisis. Mississippi banks can't pay.

Should we force the (next generation of) citizens of Mississippi (who didn't personally lie about anything) to pay all this debt for the next 50 years?

US states are forbidden (with some exceptions and loopholes) from issuing debt. I would guess that one of the main reasons why this limitation has never been lifted is exactly to avoid a situation like the one you describe. The Puerto Rico debt crisis has shown that this is not a purely theoretical concern.

Actually curious on this, my knowledge of financial theory is sorely lacking. To my understanding, states can (and do) issue debt through municipal bonds. Is this one of those “exceptions and loopholes”? My understanding of the Puerto Rican debt crisis is that their bonds were made more attractive because income from their bonds is tax exempt by federal law from most US income taxes. By (artificially) increasing the attractiveness of those bonds PR was able to borrow more money than they would otherwise.

Well, to me the answer is "yes of course" at least as long as these Mississippi officials were elected on a state level, or appointed by those elected on state level - not by Washington.

They shouldn't and that's exactly why states are allowed to declare bankruptcy and why Puerto Rico should be allowed to declare bankruptcy. States in the EU probably should be able to also.

Greece could default, but it was not clear what would have happened to their central bank, and if a default would have pushed Greece out of the Eurozone.

Due to these uncertainties, and undoubtedly also to pressure from the rest of the EU, Greece decided instead to renegotiate their debt with the Trojka.

Not really. Greece was never allowed to default properly. The referendum George Papandreou alluded to at the time, is a prime example of what I'm saying: Greece defaulting might drive Italian bond prices through the roof at that point the monetary union would be destroyed overnight.

Now that the debt has been turned from public to private, it might be easier to handle as a situation, but I doubt the EU is able to handle such a crisis gracefully.

Greece is stuck to a never-ending extend and pretend program which will effectively kill the Greek economy in the 21st century.

Greece is a sovereign country. It could have defaulted if it really wanted to. Maybe it would have required an exit from the Euro, but that would have been its choice. That they considered this worse than the alternative was also their choice.

"Well it's their choice to be uninsured, if they wanted medical insurance there's a lot of options in the market" guyputtingonclownmakeup.jpg

> Greece is a sovereign country.

:-)

I think an orderly bankruptcy process would have been preferable to either of those options. If I was in charge of Greece at the time I would have left the EU over it. I'm amazed Britain left and Greece stayed.

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